Media and entertainment giant Time Warner Inc. will cut 10 percent of its workforce, or as many as 700 jobs,  from its Internet services group AOL, in order to help curtail losses brought about by a weakened online advertising market, AOL chief executive Randy Falco wrote in an internal memo Wednesday. The cuts are expected by the end of March, primarily affecting AOL workers in the United States, and will be the largest at AOL since it trimmed about 2,000 jobs worldwide in 2007. Memo From Falco Comes Ahead Of Wednesday's Quarterly Earnings Report In trimming 10 percent from its worldwide staff of some 7,000 workers, AOL said that it will turn to three areas it now considers key in an attempt to rebound: online advertising through its Platform-A program, social networking from its People Networks property, and online content publishing through its MediaGlow system, according to Falco's memo which was sent to AOL employees late Wednesday afternoon. "Online marketers have tightened their ad buying across the board, reducing their spend by hundreds of millions of dollars," Falco wrote in the memo. "The deepening economic recession has affected every corner of the economy, including our own, [and] online marketers have tightened their ad buying across the board, reducing their spend by hundreds of millions of dollars," Falco noted. The memo from Falco came ahead of Wednesday's release of Time Warner's fourth quarter financial earnings, which are expected to report a 12 percent decline in digital advertising profits for the quarter, according to Swiss banking giant UBS. Earlier this month Time Warner, which has itself cut 500 jobs at its Time Inc. property and 800 at its film distribution business, said that 2008 was likely to go down as the first year it has seen a loss since 2002. Pay Freeze And Location Downsizing Part Of AOL Strategy Some job cuts were also expected outside AOL's U.S. operations through at least the middle of 2009, and an employee merit pay raise freeze will also be implemented this year to help prevent additional layoffs, Falco wrote in the memo. "To further keep employment costs down, we will also forgo merit pay increases in 2009," Falco noted. "This is a  painful decision, but one that many companies have prudently taken to help minimize the number of layoffs they have to make," the AOL chief executive added. The layoffs announced Wednesday were the latest in an attempt by AOL to change its focus from being a subscriber-based Internet Service Provider (ISP) to an Internet advertising and content provider, and follow a restructuring plan that saw April 2008 layoffs of some 100 people. In 2005 AOL's Mountain View, California neighbor and Internet search leader Google purchased a 5 percent stake in the company that valued AOL at $20 billion, however when Google released its fourth quarter earnings last week it included a writedown that placed AOL's present value at a substantially less $5.5 billion. AOL Laying Off 700 Employees Citing Weak Online Advertising Market AOL's business in Mountain View will shrink from a two building operating to one, while the office space in its Los Angeles location will also be cut in half, coming on top of a previous move that transferred the company's  headquarters to New York. Consolidation of certain AOL properties was seen as likely according to Falco. "We will continue throughout the year to carefully and thoroughly review all our products and services to make sure every one fully supports our strategy and has the potential for growth," Falco wrote in Wednesday's memo. Time Warner said earlier this month that it would implement a writedown of $25 billion due to lowered values at AOL and its publishing and cable television businesses. AOL reported third quarter advertising revenue that dropped 6 percent, and display advertising that fell by 15 percent. AOL said that it planned to focus in part on specialty Web sites for the remainder of 2009, a sector where it has noted increasing success. "This momentum will continue in 2009 with our goal of creating an additional 30-plus editorially curated sites focused on consumer passion points," Falco wrote in the Wednesday memo, noting also that AOL was "two years into a three-year turnaround plan." Related Links:
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